The impact working from home could have on your car insurance, mortgage and tax bill - Gareth Shaw

Dear Gareth,

I’m now working from home due to the coronavirus crisis and I’m not sure how this affects my personal finances.

If I am working from home but using my car to visit colleagues and my boss, with social distancing, or post-lockdown to meet at a motorway service station, do I need business car insurance?

Should I inform my landlord, freeholder, lender and insurer? Could my landlord refuse permission or charge me more rent? Or if I was using a garden room, could it be liable to business rates?

And must I just accept that my winter heating and power bills will be considerably higher than last winter when the time clock went off at 7.30 am and came on at 7.00 pm?

David Mackmin, Milford Haven

Gareth says:

There’s plenty to unpack here and I can understand why it can be confusing.

While the government has published a huge amount of guidance on what is permissible under lockdown, you often have to consult the individual terms of your financial products, legal contracts and lending agreements.

Therefore, I’m going to caveat many of my answers to your questions with a big ‘it depends on your terms’, so I’d urge you to start rifling through your paperwork to find out the reality.

When you buy car insurance, your insurer will ask how you intend to use your vehicle – for social use, commuting or any business purposes, with ‘business’ usually defined as being separate from travel to more than one location for work (commuting).

Some insurers will have different definitions, and some cover you on certain types of business use as standard.

One might argue that, logically, the use of your vehicle could be classified as commuting and that business car insurance would only be necessary if you were driving to clients’ houses, or driving employees around.

However, three of the four major comparison sites define commuting as travel to a ‘permanent’ or ‘single’ place of work. Insurers will have slightly different definitions too.

In practice, most insurers would be fairly reasonable about your situation. You don’t have to advise your insurer if you’re having to drive more because taking public transport, for example, is not possible. Get in touch and explain your situation, and see what your insurer says, but I doubt you’ll have to switch to a business policy.

You shouldn’t need to inform your landlord that you are working from home temporarily. It might be different if you’re running a business from the property, as this may be against the terms of your tenancy agreement.

Technically, conducting business from home could invalidate your mortgage and home insurance policy. But I very much doubt that is going to be enforced by lenders, who are, to their credit, bending over backwards to support borrowers during the pandemic.

You may need to let your home insurer know about the fact that you’re working from home, and consider adding extra cover for new items in your home, though if your employer owns the equipment, it should be responsible for insurance cover.

The Association of British Insurers, which represents the insurance industry, says that if your work is mainly clerical in nature, your standard home insurance should cover you.

The government states that you don’t have to pay business rates for home-based work if you only use a small part of your home, such as a bedroom, for your business.

If you’ve made changes to your home for your business, you may be liable. Did you build a garden room specifically to work and receive clients? If not, it shouldn’t be an issue.

The self-employed have always been able to claim expenses for bills if they conduct work at home. But there are some restrictions on tax relief for employees.

If your employer has asked you to work at home, you should be able to claim tax relief on some of the bills that solely relate to work – such as gas and electricity, and phone bills for work calls.

But rent or broadband, and anything else that is used for both private and business use, cannot be claimed for.

Which? has published extensive free guides to your coronavirus rights and how it has affected your finances at which.co.uk/coronavirus.

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